How I went from $100-an-hour programming to $X0,000-a-week consulting

https://training.kalzumeus.com/newsletters/archive/consulting_1

by atomical • 14 years ago

1034 261 14 years ago

training.kalzumeus.com

chatmasta3• 14 years ago

This is the best article I've read on HN in a long time.

chanux• 14 years ago

Pardon my ignorance. What does a consultant do?

pdog• 14 years ago

Full-time programmers can be had for $50 to $100 per hour, but they can create millions of dollars of value, far in excess of what they're paid. Consultants are one of several groups of people who take a share of the difference.

loceng2• 14 years ago

This is why I work for myself, am building my own company(ies). I knew I would never get paid the value I can bring to the table, and I would never be motivated to do my best in that scenario.

patio119• 14 years ago

In broad strokes, make businesses money.

In a little more detail, I (personally) work mostly for B2B SaaS businesses and know a few things which tend to work for generating incremental growth in revenue. If you've followed my blog or HN posts they won't sound all that impressively new: write drip email campaigns, do A/B yet, redo pricing tiers, optimize conversion funnels, etc etc.

There are many other consulting specialties out there, obviously, but that seems to be a mutually happy place for my abilities and clients' businesses.

enjo• 14 years ago

Just to be clear:

This is different than "freelancing" or "contract development". This is more traditional business consulting. You're going in and changing processes and structures more than anything else.

It might be around a specific goal like "make our signups more effective", but you're not just writing some code. You are going in an helping them to change their mindset by incorporating feedback (A/B testing) and new methodologies to run their business better. You get paid so much because the results don't just result in better signups, but in a transformed company at the end.

To do this type of consulting you need extreme credibility. Either a big business win, an ivy league education, or something equally as impressive.

SonicSoul2• 14 years ago

ha, when i saw the headline and read the first paragraph i assumed this was a sales pitch for something.. but after scrolling down to the bottom and not finding anything i shortly realized this is the author of kalzumeus.com which is the source of some of the best advice I (as a programmer) have read on the internets.

One gotcha here is that not every programmer can be as successful doing such business consulting. I think it is a different skill (muscle?) that must be developed in order to talk with suits and create the aura of instant value. I wish i knew how to train that muscle more :)

kruipen• 14 years ago

ha, when I read it I still think it was a sales pitch ... not that there is anything wrong with that.

codewright• 14 years ago

Am I the only one that checks the domain after reading the title?

StavrosK• 14 years ago

The sales pitch comes later. The good thing about it is that, if you're interested in these posts, you'll probably be interested in what's on sale.

brc2• 14 years ago

1st lesson : stop using language like 'suits'. They are just people with budget to spend on problems they need fixed. The key here is that talking to people is a skill which can be learned. The way to learn is to start, and make some mistakes and learn quickly.

debacle5• 14 years ago

What if you're already a consultant, but are tired of Internet marketing (and its related accoutrements)? Is there a pivot for that?

bmelton4• 14 years ago

SAAS? PAAS? I think it's fairly well known that Patrick consults to help fund his other projects, with the ultimate goal of becoming independent of consulting in favor of passive income. (Apologies if I'm mischaracterizing Patio's intent -- that's at least how it always seemed to me.)

Alternately, you could raise your rates a bunch, save the difference and try to retire early.

debacle5• 14 years ago

It might just be me, but I don't see a market for consulting based on writing RESTful APIs.

I could be very wrong about that, though.

trhtrsh• 14 years ago

Patrick's other projects are the self-education, credibility-development, and marketing for his consulting business. He is not going to retire a millionaire on bingo cards and appointment reminders.

bdunn3• 14 years ago

You can help businesses create or optimize internal tools that make current positions unnecessary (cut costs) or make tasks that take 5 hours a day take 5 minutes (increase efficiency.) This won't involve conversion rates, lifecycle mailing, customer-facing split testing, or other marketing standards.

flurpitude• 14 years ago

Sigh... I'd settle for someone giving me $100 per hour.

debacle5• 14 years ago

It's not that hard. What do you know how to do? How do you currently market yourself? Who do you market yourself to? What are you really good at?

100 an hour seems like a lot to most of the contractors I talk to, but it's actually probably less than the average for a contract programmer.

cdavid• 14 years ago

If you mean in general, a consistent job at 100 $ /hour is completely different from being paid 100 $ / hour for consulting. The former is rather hard, the latter is indeed rather low. The end of Patrick's article gives one of the main reason why (scaling consulting is hard).

I consistently meet people who earn > 200 $ / hour, without much programming experience (but know an open source project of interest very well).

elmuchoprez3• 14 years ago

I consistently meet people who earn > 200 $ / hour, without much programming experience (but know an open source project of interest very well).

I see this quite a bit as well. People can "luck into" something that gets hot and ride that wave into decent money in the short term. But a decent programming background is what keeps that ship floating because you always have to stay on top of the next thing if you want to keep that up, and it's hard to keep up with everything and even evaluate new stuff without some fundamentals.

TallboyOne2• 14 years ago

If you don't have a large variety of jobs to pick and choose from, you're not doing it right.

I'm going to rant here a moment...

The secret to getting more work than you can handle (and charging $100/hr, which is not difficult)... DONT SUCK.

I swear to god, 95% of people out there suck, your competition.

Send emails to your phone, and answer them right away when you're out and about, even on weekends or when you're out having a drink. If you're busy, just say you got their email and will get back to them when youre in the office. Try to answer < 15 minutes.

The amount of replies I hear that say "wow you are so responsive and get back so fast, I love it" is a lot more than you would expect. These are my repeat clients. These are your people and you should take care of them.

It's SO easy too, and so many people wait days to reply. That doesn't mean you need to always be working either, or that you need to suddenly be at the mercy of your email, it just means be responsive to inquiries. VERY responsive.

As far as working, dont leave loose ends. This usually means fixing up those little nagging issues that they probably won't notice. Leave them with something stellar, and go the extra mile even if it means only 5 minutes of work extra fixing something they never asked you to fix or paid you for. It takes 5 minutes, and makes a tremendous impression on them.

I'm making this statistic up, but based on what I see it's gotta be over 90% of people don't do just a few simple things. They take a while to reply, deliver sub-par product, don't communicate well... it has nothing to do with their actual site or product they're delivering, just how they handle themselves, then they whine about not having work. (flurpitude, I'm not referring to you as whining, just people in general).

PS: it seems counter intuitive (I'm going to get a lot MORE bs work and bs replies), but it actually seems to eliminate them entirely. People respect your time and your skill, and they dont' waste your time with stupid questions or emails. They're also willing to pay top dollar for your services without giving you a hard time or anything.

jasonswett• 14 years ago

You might be right about that. I'd like to offer another perspective, though: if you get into the habit of quickly replying to all emails, I think your clients will develop an expectation that you'll always quickly reply to emails, which it's not always possible or desirable to do, at least for me.

Also, if you immediately attend to every email that hits your inbox, that means you probably won't have contiguous chunks of real productivity in your workdays.

I usually wait a good couple hours to reply to any email, even if I'm not particularly busy when I receive the message. This a) sets an expectation for responsiveness that I can live up to, b) allows me to have contiguous chunks of productivity (I often close email entirely, which my clients know), and c) demonstrates to my clients that a certain level of discipline: I'm not jumping on every email, tweet, etc. that comes my way right when I see it (not that I think that's what TallboyOne is suggesting - he's talking about work-related emails).

None of this is meant to be a criticism of anything TallboyOne has said. What works for him might work better for some people than what works for me.

mgkimsal2• 14 years ago

Have a phone number and an email address on your website.

I'm surprised by how many people complain to me about "I can't find work", but

A) don't know how many people are looking at their site

B) don't even have their own website (outside of, maybe, a github repo)

C) don't have a phone number on their website

D) force me to jump through some sort of BS "contact form with captcha" crap to contact them

I get "well, I'll get flooded with spam!!!"

1. not my problem 2. i don't care 3. so what?

"I'll get too many phone calls!"

Really? That's your biggest concern? You can't find work but are concerned about getting "too many" calls?

id_ris• 14 years ago

Good luck finding someone to 'give' you even $1 an hour.

sown3• 14 years ago

So what do I do if I don't have a blog or any real friends to refer me? I don't know anyone at all here in SV and no one seems to want me anyways.

On the flip side, I suppose that there are people that could use me but they don't know how to find consultants.

The only time this has happened was when a potential employer and I didn't quite work so they let me name a price for the time I worked and they paid (rare in consultancy, I bet).

girasquid2• 14 years ago

- Start a blog

- Start going to meetups and make friends (no meetups? Organize one!)

Jach3• 14 years ago

"So what if I hate people and don't want to make friends?" (You tolerate it and with civility it's easy to make acquaintances!)

bmelton4• 14 years ago

"So what do I do if I don't have a blog or any real friends to refer me? I don't know anyone at all here in SV and no one seems to want me anyways."

Change that. Go to conferences. Go to meetups. Leverage whatever professional network you currently have to expand it. Start a blog. Post to it. Establish yourself as an authority on something.

If you can't do the above yet (because you aren't an authority on something), become an authority. Contribute to a related open source project. Get involved in meetups that focus on the topic. Find conferences that relate to it and attend... later, speak at said conferences.

sown3• 14 years ago

> Go to conferences. ... Find conferences that relate to it and attend... later, speak at said conferences.

Well, I'm screwed. I can barely speak in private or deal with people.

Perhaps someone else can use your advice, though.

zem2• 14 years ago

and if you aren't comfortable speaking or attending conferences, don't let that stop you from becoming an authority. find a topic you are interested in and start learning it in depth. identify common issues beginners struggle with and blog about them. move on to more advanced articles. you should gain recognition pretty readily.

patio119• 14 years ago

Get a blog and start making new business acquaintances. (Being in the Valley should not exactly have you hurting for options on that score.)

bmelton4• 14 years ago

Perhaps not the most appropriate forum, but in paragraph three of the post, s/peak/peek/g.

sown3• 14 years ago

How do you make business acquaintances? I have a hard enough time leaving the house.

pknerd8• 14 years ago

And what about those who not even in US and belong to a "3rd world country" where one wish to give work only because it's Cheap?

seiji• 14 years ago

Nobody wants a nobody. Have you tried manipulating the HN audience into thinking you're special? I can, annoyingly, name a dozen people from here who self-promote and pop up with frustrating frequency. After a while you start to think they're special even when they're just persistent. But few people are persistent with such follow through.

Write stuff people want. Get it distributed widely. Repeat.

intellegacy• 14 years ago

No, dear god. We need less self-promoting manipulators here and more substantive, authentic posters.

ahoyhere5• 14 years ago

It's sad that you think "writing stuff people want" is manipulative and faux.

bdunn3• 14 years ago

Take a listen to the podcast Patrick mentions in the P.S. Eric and I have had a lot of success in offering free seminars to local business leaders (e.g., "How to find customers online"), and use the opportunity to also create a networking mixer - centered around you, where people are talking about you and what you had to say afterward.

It's one of the easiest ways to build credibility and a pool of clients (direct or sources of referrals) I've come across.

driverdan• 14 years ago

2 things, Twitter and meetups. There are sooooooo many free tech events in SV you can go to. Get out and go to them!

I've found Twitter is a great way to meet new people in real life. There is little to no friction in following someone and replying to their posts. Often they'll be happy to interact with you through Twitter, even if they're internet famous. See what events they go to and go as well. Say hi if you see them. Invite them to lunch or for beers.

lhnz• 14 years ago

How early can I start doing this? I'm young but confident and I do feel like I have something to offer people already. I guess it's getting the first client which will be tricky...

sidupadhyay• 14 years ago

It's totally doable. You'll probably start off with a lower hourly at first, but you can quickly establish a higher rate and then eventually a consistent weekly as patio11 described. Early in college, I found the best way to find my true hourly rate was through project-based pricing with well defined scopes. The scope needs to be clear and you have to prevent any scope creep, as that will negatively affect your rate. Once you've gone through a project or two this way, you will have established a pretty good reputation with your clients, which would let you bill out at the real rate. After that you would be free to continue billing at an hourly or make the jump into weekly rates.

Alex3917• 14 years ago

"How early can I start doing this?"

Read the book Million Dollar Consulting. It pretty much gives a step-by-step guide, from lead gen to writing proposals to how to bill by value:

http://www.amazon.com/s/ref=nb_sb_ss_c_0_19?url=search-alias...

It repeats itself a lot and is generally poorly written, but there's still a reason why it's been the top consulting book for decades.

pfanner• 14 years ago

I have absolutely no idea how people start consulting. How old are they? Did they work something else before? Did they major in anything? Are they all independent or work at consulting companies?

graeme• 14 years ago

There are lots of ways to find a first client:

* Craiglist/eLance/oDesk ad * Tell people you want to do consulting work. People know other people. * Walk into a relevant business, after having found something could contribute, and ask them if they'd be interested in you helping them make money.

I've used all three. A local Kijiji ad has been surprisingly lucrative. Probably 10K over the past couple of years.

Referrals work great, as you're already proven.

The third one may sound iffy, but if you ACTUALLY can help, and you sound like you can, people will JUMP at the opportunity to have you help them. Happened to me multiple times.

SageRaven• 14 years ago

Damn, that sounds nice. I wonder if system admin/architecture can be modeled that way. I'd love to bill even a modest $2k/week, rather than trawl craigslist, responding to posts for "unix/linux ninjas" then having shops balk at anything over $20 an hour.

I don't know how many messes I've cleaned up (likely left by people charging a hell of a lot more than me) for really low rates.

I know, I know. Craiglist and other online boards are the dregs of the job market. But I have no network (few friends, few contacts), and I only do remote work. I take what I can get, but it sucks to see half-assed admins getting the gravy.

debacle5• 14 years ago

Craigslist can be useful for finding some jewels, but you have to be completely willing to say "Fuck no." We had a form letter we would send to these companies basically saying "We know you don't think you can afford to work with us, but we know you can't afford not to. Let us know when you're ready."

It only worked a few times, but for those few times it was worth it.

mtrimpe• 14 years ago

I don't know about sysadmin work, but I'm pretty sure DevOps could be.

I worked at a company that ended up spending probably several man-years worth of effort over a period of three years on puppetizing their environment and still doesn't have a one-click-deploy of their infrastructure and feels the pain of that acutely every few months when a new environment needs to be brought up by hand.

If someone'd been around offering 30, 50 or even 100k no-cure-no-pay work to get their environment into a one-click-deployable state in under a month or so I'm pretty sure I could've sold that internally at several occasions.

semanticist• 14 years ago

I think this is the key - selling yourself as a 'sysadmin' is like calling yourself a 'programmer' - it's a commodity.

Instead you're a site scaling engineer, or a cloud automation specialist, whatever sounds like it'll solve the client's problems - which these days are frequently that a bunch of developers set up the production environment on the fly and it just about works but isn't reliable or convenient.

I think the future for sysadmin work is definitely 'DevOps' - and it's not really that much different from old school sysadmin. Yeah a pure Chef/Puppet-managed system is more like writing code than hacking away, but behind it all it's the same kind of work.

It is definitely possible to bill US$2k per week or more as a contract sysadmin, but trolling through Craig's List isn't the way to manage it!

bartz_daniel• 14 years ago

Would love to know more about the remaining challenges to get closer of a one-clid-deployement after such a puppetizing effort.

Could you share some of the most important issues (technical or not) ? In advance many thanks.

I am really curious about your experience as we try to achieve the same objectives here with http://comodit.com

tomjen3• 14 years ago

Have you considered remote classes on how to prevent the messes you have been called in to clean up?

Or even specialize in when shit hits the fan? I mean the advice to startups are always 'find a customer with their hair on fire'.

rapind• 14 years ago

Be "The Wolf".

http://youtu.be/ANPsHKpti48

zem2• 14 years ago

as a first step, you could try patrick's advice of charging the same rate, but billing by the week (and of course speccing out the work in weekly chunks)

SwellJoe4• 14 years ago

It's cheesy, but "build your brand" is relevant to your situation. When a customer comes to you, rather than you going to them, and they've come to you because of something specific and awesome you've done or written, you can set your price and the customer will not balk.

Many years ago, I did consulting at $125/hour, but if I was going on-site (particular in another city), I'd bill by the day, at $1000/day (often putting in 10 hours a day, so $100/hour) with some sort of minimum in place, so I wouldn't drive or fly somewhere to only be needed for one day. The reason I could charge what I did was because I did some stuff that led to me being well-known. I wrote a book; it didn't sell very well, or pay me much, but when you say, "I wrote a book about system administration, published by No Starch Press" it raises you to the tier of people that can charge $125/hour without hesitation.

Also, when you have a long-running consultancy that specializes in one niche (mine was web caching, website acceleration, etc., though I also did good business in developer infrastructure, like building systems for packaging and testing and revision control, etc.), you'll have fewer customers, but they'll be customers who will value your skills. A jack of all trades, who is actually really fucking good at all trades, is incredibly valuable, but it's difficult to market that because it's difficult to prove you're really good at everything. Proving you're good in one field is just a matter of following the mailing lists and forums in your field, and being talkative and helpful, writing a blog about your subject, and eventually turning all that writing into a book or magazine articles or something.

Of course, I never took it to the next level, as this article discusses. I was still billing by the hour, and still being thought of as a (pretty high end, and difficult to find) commodity. So, I made a decent living, but it didn't scale.

drue• 14 years ago

It sounds pretty good - but I wonder what you're doing now, given the post is written in the past tense?

katedungan• 14 years ago

I found a great sysadmin on Craigslist ... I now pay a $600/mo retainer to have him on call up to 10 hours/month. I usually don't use all the hours, but sometimes I go over and pay more.

The situation works great for both of us.

I don't think Patrick's model is ideal for sysadmin work (who needs a sysadmin for an entire week?) ... but I think the retainer/on call model could be just as good ... get 10-15 companies paying $500/mo ...

johngalt• 14 years ago

In sysadmin work it's easier to make large consulting fees. The problem you have is that no one spends the money for good sysadmin architecture/infrastructure. So you can't sell "good practices". Instead just focus your work in loss aversion, not value creation. People will spend more for a emergency room doctor/hospital than a gym membership.

The keys are two simple things:

1. Be able to quickly fix expensive problems.

2. Make sure people with expensive problems know about you.

I've routinely seen multi-million dollar projects held up for months over things a skilled sysadmin can solve in a day. You just have to be at the receiving end of that 911 call, and not afraid to quote a big flat fee for problem resolution.

samstave• 14 years ago

>The problem you have is that no one spends the money for good sysadmin architecture/infrastructure.

I disagree with your statement. I am currently in Chicago just completing the infrastructure implementation for a large enterprise client where I specifically was brought on to do their tech infrastructure.

They pay a lot for this service.

Here is my scope of work:

Physical cable plant design

Physical network design (based on their corporate logical architecture)

Physical/Logical implementation (Procure, track, receive, rack, patch, power, config, test, coordinate, hand-off)

Turn up and test

Day-one operational support and hand-off.

Doing this for all their global offices.

zenocon• 14 years ago

I bet Team Romney / Orca would have paid handsomely for this at zero-hour, despite all the cost-cutting they did up front.

rmc• 14 years ago

I don't know how many messes I've cleaned up (likely left by people charging a hell of a lot more than me) for really low rates.

The implication being that if a company only pays peanuts, they probably only employed monkeys before, and it'll be a head-wreck of a situtation.

lambda2• 14 years ago

Protip: don't ever reply to ads that ask for a "ninja" or "rockstar." Look for the more boring sounding jobs; they will have fewer people competing for the job, so you can probably make relatively better rates.

Also, why do you only do remote work? Is there no one near you who needs a sysadmin? Could you travel? People value face-to-face interaction a lot more than online; if you only do remote work, then some guy in Bangalore can undercut your rates (hence the $20 an hour offers), and you're not really offering much over him.

And as the original article says, don't charge per hour. Charge per week, or per incident. And charge rates that make sense for that kind of time frame. Read the original article; it has good advice. Once you charge per week (or per incident, based on a standard weekly rate), you can start talking about "OK, you want to spend less, which things should I not do", not "Well, I think I'm worth $50 an hour, but since I need the money, I'll take the job for $20"

Yes, for systems administration it can work that way. Here where I work we don't really have any sysadmins (or everyone's a sysadmin, which is even worse). We have developers, and we have tech support who support customer systems, and we all kind of chip in on the system administration, but we don't have anyone who's job it is to maintain our own network. It finally got so bad that we've brought someone in to straighten it out. I don't know the details of how he's being paid, but I could easily imagine it as "it will cost $5000 for me to track down your problems, reconfigure your core router, set it up in a way that will be more maintainable in the future, and write the documentation for running that."

wpietri2• 14 years ago

> Protip: don't ever reply to ads that ask for a "ninja" or "rockstar."

No, please do reply. Then go in wearing leather pants, with white powder on your upper lip and reeking of Jack Daniels. Use a pawn-shop electric guitar to smash the fuck out of their interview room. Then stab somebody with a katana on your way out.

It's the only way these people will learn.

wpietri2• 14 years ago

> I don't know how many messes I've cleaned up (likely left by people charging a hell of a lot more than me) for really low rates.

Sorry to say it, but almost nobody hiring consultants gives a shit about cleaning up messes. If they did, they wouldn't need to hire consultants to clean up messes.

Don't clean up messes, or at least not the things that you perceive as messes but they don't. Just like the article says, solve problems that people with money know that they have. If somebody with a clusterfuck of a system is paying $30k/month for hosting and you can cut it in half with a month's work, then charge them $30k. They'll balk, but tell them they'll get paid back in 2 months. If they are too dumb to take that deal, fuck 'em.

I know it's painful to leave people with all the other messes they have. But if you're going to do charity work just because it makes you happy to tidy things, then do it for actual charities.

whileonebegin2• 14 years ago

The title is also a little confusing. It's not about making $XX,XXX per week programming. Rather, it's about marketing. I'm not sure the same rates would apply to developers becoming "consultants". I think it's something like this (two different tracks):

Web Site Developer => Marketing/SEO => Consultant => $XX,XXX OR Programmer => ISV => Product => $XX,XXX

danso2• 14 years ago

Excellent article.

1. I would be interested in learning more about what a programmer brings to the table in the consulting field. I mean, besides raw programming knowledge. The OP mentions Fog Creek as one of his first clients, a place that obviously is not short on programming insights. What does a consultant with programming chops bring that a non-programmer doesn't? Better ideas? Better tailored ideas?

2) Pedantic alert: "peek" is spelled as "peak" in the introduction.

patio119• 14 years ago

What does a consultant with programming chops bring that a non-programmer doesn't?

The ability to write functional computer code, for one, which is a superpower.

Besides that, I speak the language, engineering folks generally like working with me over working with "icky marketing types", I have a good understanding of what is easy and what isn't in terms of implementation, I can spec projects or deliver prototypes without needing my hands held too much, etc etc. (And virtually my entire shtick is "Marketing objectives which are worth serious money to you can be achieved by writing carefully considered code.")

danso2• 14 years ago

The ability to work with (and have the respect) of the engineers is definitely an asset that cannot be overvalued.

But in terms of writing functional computer code...how much are you actually writing? Is this code merely to wireframe/prototype something? Or is it an actually deliverable that the company will build atop?

I guess what I'm getting at is the usual cynical trope by engineers against consulting: that consultants are hired to tell you what you already know/should've known. So given a hypothetical company of such stature as Fog Creek, what is your strategy for convincing them that you can tell them something they don't know? I'm not saying that engineers are above needing consultants, it just seems like a culture that, as you point out, can be extra-resistant to being told by a third-party what to do, in lieu of a concrete deliverable.

mgkimsal2• 14 years ago

Do you mean "functional" as in "it actually works" or "functional" functional?

mbesto• 14 years ago

I would be interested in learning more about what a programmer brings to the table in the consulting field.

Simple, reduced risk. Patio11 has built his personal brand very successfully. (not overnight mind you) So much so, that you know exactly what you expect to be delivered when you would engage with him. Much of the content that he produces (especially that which is consumable by you and I) gives a very good indication what you would expect if you worked with him.

SatvikBeri2• 14 years ago

Being able to bridge the gap between understanding how people work and how it's possible to improve that work with technology is an incredibly rare and valuable skill right now.

Quite frankly, most people have no idea what's possible with programming. I once worked at a company where they spent dozens of hours each month manually updating monthly reports in Excel spreadsheets. If you watch the average person work, you'll see dozens of things that could easily be automated or simplified. Watch a little more, and you'll see the possibility to add new capabilities that simply weren't possible before.

Jach3• 14 years ago

Apart from "be awesome", "know your abilities well", and "manage project scope carefully", do you have any advice on not choking? Have you ever had to scale back on delivering what was initially agreed upon?

ronyeh2• 14 years ago

Two important points I learned was: 1) charge by the week, and 2) charge by the value you will be providing, rather than how much your time is worth.

Charging by the week allows you to not have to keep track of what's billable and what's not (e.g., you chatted with the customer on the phone for 34 minutes).

Charging by the value you provide avoids the conversation of "Hey, you're charging $200 per hour... that's more than I make. And that's like almost $400K per year! Can we get your rate down to like, $90?"

Instead, the conversation becomes, "We want to get at least $40K of value out of talking to you, but have only budgeted $10K for this exercise. How much value can you provide us over how many weeks?"

That was definitely an interesting writeup!

nhangen4• 14 years ago

I ended up here on accident, but I can vouch for this system's value.

I WAS freelancing at between $75-$100/hour, but having to work very hard for every contract. On the side my partner and I were building software, selling a nice amount but nothing that was going to allow us to retire in a year.

However, suddenly people starting emailing us after purchase, asking if we could build custom versions for them. Most turned out to be duds, at first, and then something changed. Suddenly we're charging weekly retainers and working on near six-figure projects, all on business that sought us out because of our software.

Will this work for everyone? I'm not sure, but it did for us, and we didn't even see it coming.

pc862• 14 years ago

Was this a particularly "niche-y" software that you had (perhaps unknowingly?) positioned yourselves as the leaders?

Presumably it wasn't The Next Big To-Do App but something that gave quite a bit of value.

nhangen4• 14 years ago

It was our crowdfunding plugin for WordPress - http://ignitiondeck.com

s04p• 14 years ago

To be very honest, this reads like the typical Shoemoney "how to earn $100k within x weeks" article. It's not a big secret that SEO and conversion optimisation can generate a lot of value, and I guess you consult a lot about these topics?

whileonebegin2• 14 years ago

I was thinking the same thing, even down to the sign-up form for the newsletter. Not that there's anything wrong with that, shoemoney has done quite well and his posts are usually quite good.

chatmasta3• 14 years ago

When I hear "consulting," I think about escaping the grunt work that is actual programming. How much of your time as a "consultant" do you spend actually programming? What other tasks do you do on a day-to-day basis?

patio119• 14 years ago

Talking to clients, getting buy-in for things I want to make, looking at metrics, thinking, learning about the product / space / company / etc, assorted engineering stuff that isn't programming (wireframes / specs / tests / demos / docs / etc), writing copy, etc etc.

Time allocation varies greatly depending on the client and what we're working on. I've had engagements where I spent 100% of my time talking and I've had engagements where I spent as-close-to-100%-of-time-as-practical in heads-down going-to-ship-this-project mode. Most engagements fall somewhere between the two extremes, clustered away from heads-down-programming.

chatmasta3• 14 years ago

Do you have engineers on payroll to whom you can outsource the bulk of the actual programming, or do you have a network of independent contractors that you keep going back to?

dschiptsov• 14 years ago

"Finding a bigger fool" method because I'm, air quotes, "Internet famous."?

Oh I get it, it's very clever.

Placing narcissistic postings on HN in an a proper time (Monday, morning) with a catchy headline and provocative wording, including digits is a nice work, of absolutely nothing special.)

sabat• 14 years ago

No idea why this would be downvoted except for the fact that Patrick Can Do No Wrong. He's wildly opinionated, questionably successful before his sudden consultancy (he wrote a mildly successful Bingo card program in Java), and self-satisfied beyond measure.

emmett• 14 years ago

Because it's mean spirited and adds nothing of value to the conversation. Your comment is similar; your dislike of Patrick is based entirely on who he is and doesn't bother to engage with the content of the essay at all.

polyfractal3• 14 years ago

I feel like every post by Patrick should be printed out and taped to the wall. So many great lessons in his writing. Thanks patio!

Question of my own: if you are breaking into consultancy, how do you go about cold-calling potential clients? Say you've identified a few clients that you think you could help. What kind of email do you send them?

Go the honest route and say "Hey, I'm new but I want to help your business make more money...I'll take a cut of whatever increased revenue I derive, otherwise you dont have to pay me" ?

Or go with the "I know what I'm doing route" and just pitch that you are a professional doing this all the time?

JagMicker• 14 years ago

I am not the author, but my advice would be:

-Focus on the "Sales Process". You won't go anywhere without first identifying the need(s) of the prospect and making sure they know that you understand their need(s). Then determine who the decision-maker is, so you don't waste your time selling to the wrong person.

-Approach prospects via email AND phone, until you've figured out which method they prefer.

-Don't give up until you've received a clear rejection. Offer rebuttals to their objections.

Stick with those rules, and work to refine your pitch. Persistence is key!

smiler2• 14 years ago

I've been freelancing / consulting for just over a year myself and am discovering more of the process myself. Here's what I've done so far..

- Reach out to your existing network - if you have friends who have done freelancing / consulting, find out what companies they did freelancing / consulting for - chances are those companies still need it.

- Offer to meet for coffee / lunch / dinner. I'm based in the UK and was trying via e-mail to speak to a potential client. It just wasn't happening. They are based in the US. So I called them up and offered to meet for dinner there at a time convenient for them - they accepted and I had the dinner last week. It is very easy for someone to decline a phone call / conference call. It's much harder for someone to do that when they know you have made an effort to turn up in person - they also have to eat so meal times work good.

- I find being honest is the best route to go. They expect you to know what you're doing! I think it's fine to say - I've just stepped out of employment and now I'm looking to build a business myself in what I've been doing - people respect you for trying to start a business!

- Don't offer to do something for free too early on. The person you're pitching to is not working for free and they won't be expecting you to work for frre either? Yes, you may need to offer something for free to land a client initially - but do not do it with open-ended development!! Instead suggest you do an analysis of their system etc and write up a report and how you'd improve things - at least that has a fixed scope. Or ask for a dataset and show simply how you can use that data to give them some new numbers they don't yet have.

polyfractal3• 14 years ago

Thanks for the advice! I'll give the honesty (without self-degradation aspect) a go.

I've done freelance programming in the past, but the gigs were mostly "build us a CRUD app" type jobs. Paid well, relatively easy work...but not really want I want to be doing. I'd rather be doing bigger picture work like funnel optimization, testing, metrics, etc.

Unfortunately, I also don't have as much experience with this, which is why I think my default instinct was to offer "for free!" as a risk-reducer. The analysis or quick report on their processes is a good idea, and would make me feel more comfortable in the situation I think.

roel_v• 14 years ago

"I'm based in the UK and was trying via e-mail to speak to a potential client. It just wasn't happening. They are based in the US. So I called them up and offered to meet for dinner there at a time convenient for them"

I'm probably missing something here, but tell me you didn't fly to the US to have dinner with a potential client you were cold-selling yourself to?

patio119• 14 years ago

So there's some sort of difference in the neurological makeup of developers and business owners around the phrase "you don't have to pay me." Developers think that proposition decreases risk. Business owners think exactly the opposite. It suggests that there's such significant project risk associated with employing you that the market forces you to self-indemnify for that risk upfront, which virtually no other service provider they use does. (Separate from what your client thinks of it, it also puts your paycheck at the mercy of clients' ability to e.g. follow through on your recommendations. Clients generally earn the results they get from working with outside consultants, just like they earn the results they get from working with their own employees. The ones who do everything in their power to make engagements a success tend to do better than ones who... don't. You probably still want to get paid when they... don't.)

I'm not totally opposed to some sort of variable payout mechanic to pricing, but the vast majority of my engagements are structured "I work X weeks at $Y per week." By the time I've sold you on the engagement, I should have been able to sell you on X$Y being an acceptable price to pay for the risk-discounted probability space of all possible outcomes to the engagement. (n.b. If you do variable payouts for anything, you need to figure out how to transfer a large percentage of the upside from the client to you for the math to work out.)

If I personally was selling you an engagement, and you said "What happens if this doesn't lead to an improvement in the business?", the very next words out of my mouth will be "It is entirely possible that this engagement will not lead to an improvement in the business. The vast of my engagements have been successes. Some of them, like the ones we talked about earlier, were incredible successes. Let's talk about ways we can be more likely to make this engagement successful. If you do not believe that this engagement is likely to be successful, we will not do this engagement." (I'd also independently decline an engagement where I thought it wasn't likely to be a win or would meaningfully damage the business in event of a failure. I typically work for companies with revenues in the eight figure range -- if they set fire to my entire paycheck, nobody goes home hungry.)

As to what you personally could offer for risk reducers, absent a history of doing exactly this thing before, I might suggest reaching back into your portfolio of other things you have done and showing off ones which demonstrated likelihood of success. In my first few consulting engagements, my main portfolio piece was "similar work which I did for my own business worked out well, as evidenced by a few years of blog posts; here's a few I like." After the first few engagements, well, BCC was no longer the most credible piece of evidence I could point to.

polyfractal3• 14 years ago

Great, thanks Patrick. I didn't even realize that I was self-indemnifying my abilities up front with a phrase like "for free"...but in retrospect it is exactly that. If I'm confident in what I can do...why the need for offering free services?

Thanks for the advice, I'll try to put this into practice. :)

clebio• 14 years ago

Everything you mention rings true with my experience in the business world (such as the difference in mindset of engineers versus management types). In construction, variable payout can be managed by meet-versus-exceed of customer want date. Have you seen that used in your area, or have an opinion for or against? Thanks for such excellent free advice.

pknerd8• 14 years ago

Thanks Patrick for this piece. Very helpful. A question. What do you suggest if I visit some online site/system, find some weakness or area of improvements and contact the owner and tell how it can be improved? Will it work?

zrail• 14 years ago

This is a great article, but one thing it doesn't really address: how does one get started doing this while still keeping a day job? I would love to start charging for value by the week, but if I can only spend 10 hours a week on a particular contract, how do I sell that?

ronyeh2• 14 years ago

Charge per 0.25-week increments? As long as you hold up your end of the bargain by providing enough value, they'll be happy to recommend you to a friend, or request your services again. Later on, you can charge for larger increments while retaining your billing rate.

reubensutton• 14 years ago

I think the point isn't really that he's charging by the week, it's that he's selling the value he provides to the company, rather than strictly selling his time.

count• 14 years ago

Your value will be 1/4 of what the full week of work would be, so price accordingly?

Swizec4• 14 years ago

Reading this ... man, I'm not even at $100/hour programming yet.

bsimpson• 14 years ago

I started freelancing out of college. Took a job, raised my prices, took a job, raised prices, etc. until I felt friction in the market.

Then, I got hired by one of my clients and asked to find someone to fill my former shoes as a freelancer.

I was charging $90 an hour. They were relying on firms like the Creative Group who have the ability to charge 100% markup on the people they hire out. As a result, I realized the people I was competing with at that rate could barely tie their own shoes.

I decided in that moment that I was pricing myself into the wrong league and need to raise my prices considerably if I ever get back into freelancing. Thanks to this post, I'll be billing by the week. =)

On a related note, there's room for massive disruption in the contract labor space. It's not hard to come up with a service that provides a lot more value within the current economics of that market. I'm not sure contract labor is a business I'm passionate enough about to start, but if anyone wants that have a chat about it, let me know.

Swizec4• 14 years ago

Well I'm out of college since 2 months ago. Going from there :)

I'm at the point where I'm feeling the first friction in the market; still figuring out what type of lube it needs.

(big part of the problem might be the market itself, I'm focusing on working with startups)

pc862• 14 years ago

It really is just a matter of charging more. Don't take more work for less than $n an hour. Grandfather older clients in if you want, or don't if they're not the type of client you'd want to work with long term.

As Patrick said in the article, there's no secret to charging more, except charging more.

I have a full time job and have intentionally priced myself so that I only have one or two side jobs at any one time ($125/hr for PHP). I am also not actively seeking any work, the last couple jobs have been from existing clients or new ones that have former clients working there now. Given my experience with intentionally raising prices 30%+ across the board and taking 50 hours/week off the table, I have little doubt there's practically a line out Patrick's door with CEOs holding $10-50k checks in their hands.

Swizec4• 14 years ago

I live in a country where very senior developers often get confused and charge as little as 20 euro per hour. In comparison, my higher rate seems ludicrous and I have trouble with people.

Yes, I am working on moving and yes I do work mostly with remote clients. But you know how it is, clients feel much better when you can take them out to coffee.

saryant2• 14 years ago

I'm in a similar position. I graduated last May, took a full-time job that has ended up being completely different than what was advertised and I'm about to quit.

During college I worked part-time for a small company doing ASP.NET and I'm close to starting up for them as a freelancer/consultant while I work on some product ideas I have. My hope is that I can leverage my experience with that company into other consulting gigs in the future.

My problem right now is that when I was working for them during college I was getting $20/hour. Before reading Patrick's post I was hoping to get up to $30, now I feel like that's inadequate! Just not sure how to ask them for more.

laurentoget• 14 years ago

A more appropriate title could be 'Get rich and famous quick by posting articles about quickly becoming rich and famous on Hacker News'.

F_J_H• 14 years ago

There seem to be a lot of comments centered on “wow, this sounds great – I wish I could charge more” or “how do I find these high paying contracts”?

Here’s one way. It may seem obvious to many, but I think it bears stating.

If you are looking for consulting contracts that pay really well, focus on providing a service that helps companies make money rather than save money. In other words, help grow revenues rather than reduce expenses – people pay much more for that.

Here’s the reasoning: When business managers, executives, etc. are given targets, they typically relate to increasing revenues much more often than reducing expenses. Not surprisingly, increasing revenues is therefore “front of mind” for those with budgets to make it happen, and they see tremendous value in someone who can help them do that. The fact that a little automation in the accounting system will save a data entry clerk a few hours a month – hmmm...maybe next month.

Case in point - I remember reading a comment somewhere from a Google employee who was complaining that at Google, those working on the revenue generation side of the business (i.e. advertising, adwords, etc.) got all the “love and attention” in terms of getting the resources required to get their job done, while others working on more obscure projects had to put up with leftovers. Now I’m not sure if that is actually true at Google, but I wouldn't be surprised as I've seen it at many other companies – the “rain makers” are the darlings with dollars to spend, and the back office ops folks are left to struggle with fewer resources. All injustices aside, find a way to provide something to the rain makers.

The type of work that Patrick does directly improves revenues. If you are a DBA selling tuning services to help companies re-write gnarly queries for example, well, unless a slow performing query/process is directly impacting revenues in some way, it likely is a secondary priority in devops/support where budgets are tight and “learn to live with it” is becoming a way of life.

Terry_B3• 14 years ago

This is a great point. I've been trying to think of as many things programmers can do that increase revenue as possible.

A/B Testing and sales funnel optimization is definitely a winner.

- Optimizing how a company utilises it's resources

- Optimizing the speed and performance of a critical business function.

- Increasing marketing reach

- Generating more sales leads

What else guys?

pav3l• 14 years ago

I actually think of your first two points (optimizing...) as cost cutting services, while the other two are good examples.

davemel374• 14 years ago

The obvious thing to do is to find ways to incorporate Growth Hacks into the product.

One such formula would be to browse API's on programmableweb, and other places looking for opportunities to leverage other sites audience as a platform.

Another thing you can do is profile an audience and crunch big data to help find new opportunities...

nandemo2• 14 years ago

> There seem to be a lot of comments centered on “wow, this sounds great – I wish I could charge more” or “how do I find these high paying contracts”?

Actually, I'm wondering how can I get gigs that pay $100/hour in Japan.

Sarien• 14 years ago

I can't agree more. 8k as a Rails dev? Converted to USD at current rates I make about 4.9k as a C++ dev. I feel like I am doing something seriously wrong. :/

new2992• 14 years ago

As someone who is currently living in Japan, but only working remotely for companies in the US/UK I'm kind of interested to know how you find work here? Is it hard to get contract work? Where do you look? What is the pay like?

nazgulnarsil• 14 years ago

So your advice is isomorphic to the time-tested "get close to the money"?

davemel374• 14 years ago

I humbly disagree with your theory that making money for a company is more valuable than saving them money.

As a marketer/rainmaker, I can assure you that I get much further with clients when I can cut their advertising and marketing costs, or cost per acquisition, than when I find them more profitable traffic and revenues.

My clients never scream, bring me the rain... They demand, "Bring Me More Rain For Less Money."

I think the dynamic going on is that people hate losing money, and when you find them wasted money they can save, they view it as "their rightful money,not something you got for them." In fact, saving them money that they were wasting can really rattle their ego, and make them feel like they were taken advantage of, and who wants to be the bearer of bad news?!

Making money for companies though is just not powerful enough to be the end all solution to rake in the dough.

Being able to find cheaper traffic and revenues to generate proportionately less traffic or revenue is a much bigger win. (i.e. if you make them $1000 at a cpa of $100 a customer... you are better off generating for them $800 for a $75 cpa... even though the rain is less, the cpa is better, which makes them look really good, and is a defensible place to be...

Terry_B3• 14 years ago

You're still way up the pointy end of the business though. You are directly involved in acquiring customers.

I think the OP was making the contrast more with people who try and reduce the companies admin overhead slightly by automating parts of the accounting system.

That type of thing is easy for a company to put off and involves getting through cultural change and threatening people's turf to implement. A harder path.

SatvikBeri2• 14 years ago

Thanks for sharing. It's interesting to note that within a profit center (marketing), cost cutting is useful.

I think it depends a lot on your audience. If you're selling an IT system to an IT director, you can emphasize the cost savings. But if you're selling the IT system to a CEO you might emphasize how it helps the company's customers and leads to more revenue in the long run.

JVIDEL• 14 years ago

I was going to write the same thing: it's really really difficult to get clients when your pitch is "I can increase your revenues" because the average client wonders if you can deliver on your promises. But when you talk about saving money they are all ears.

When I was 12 a friend of my dad's was complaining about problems managing his warehouses and I offered to write him a program that would solve his problems and save him money.

That's how I got my first job, writing some code for $70 an hour, not bad at all.

Right now I'm working on a project that has a long list of clients (clients, not users) signed up and hasn't even launched.

Our catch? we are not only better than the competition, we're up to 40% less expensive.

philwelch• 14 years ago

> If you are looking for consulting contracts that pay really well, focus on providing a service that helps companies make money rather than save money. In other words, help grow revenues rather than reduce expenses – people pay much more for that.

But decreasing costs by $1 is mathematically the same as increasing revenue by $1--it increases profitability by $1. Which means any process or mentality that prefers one to another is biased in a bad, purely self-destructive way.

orwens• 14 years ago

It depends on how you add $1 to revenue. If you do that by increasing prices, you are right. If you add $1 by extra sales, you have to take the cost of delivering the service/product to the client into account, and there is often a marginal element to that. In other words, your cost base is not totally fixed. So some of that dollar is eaten up in delivering the service

shin_lao• 14 years ago

Except there is a limit to how much you can reduce costs, not to how much you can increase revenue.

m0nty• 14 years ago

It's about the psychology. One thing I've learned from consulting gigs etc is that clients are irrational and you have to learn to deal with it. If you can do the same amount of work but get more kudos for it, why waste energy on the low-rewards activities (i.e. saving money rather than "making money").

So you're right from a programmer's perspective, and about the unhealthy bias. But most people don't think like that.

nfm2• 14 years ago

The problem is that reducing costs doesn't typically scale. If you want to grow a businesses profit significantly, you need to increase sales. It's entirely reasonable to double your sales. It's pretty difficult to halve your costs.

dalore• 14 years ago

It's not the same because you will pay slightly more tax on that $1 going up, and slightly less tax on reducing your costs.

daemon132• 14 years ago

It depends...

Although focusing on growing revenue is psychologically more comforting, economically saving on expenses is more beneficial.

When you save 1 dollar, your profit increases by 1 dollar.

When you sell 1 more dollar, your profit increases by 0.1-0.9 dollars (depending on your margins).

To put it differently, if a client is a mature company that is growing 3% annually and which gross margin is 10%, probably saving expenses is a better value proposition.

If a client is growing 100% annually and has gross margin of 90%, then, obviously, increasing revenue would be perceived a better value by the client.

raverbashing2• 14 years ago

Yes, but

Savings are naturally limited, growth is potentially unlimited

Let's say your company sells a product and it costs $10 to make it. You can go and maybe make it cost $9 to make it, but not much less. So you improved their profit by $1 (hopefully)

Instead, if you can make it sell 10x more product (which could be feasible), hence having a better effect than savings.

flyinRyan3• 14 years ago

Also, if you're pitching money savings then you're moving the client into a money saver mindset which might make them think your rates are too high.

jwingy• 14 years ago

On a related note, does anyone have some informed opinions on the best type of business entity (e.g. LLC vs S-Corp vs C-Corp, etc.) to set up for a consulting business such as this?

logn• 14 years ago

You mean LLC vs Corp? I'd go with an LLC. Corps have more formalities like required meetings, minutes, etc. And they're set up to be invested in. LLC should protect your assets without having to jump through too many hoops. The taxes differ, consult a tax pro. You can always convert an LLC to a corp down the road.

That being said, I consult on the side and am trying to grow my business and haven't set up any company yet. It's a little risky but then again I'm not doing the kind of work where I'm likely to get sued, and I don't have many assets.

jacques_chester5• 14 years ago

Talk to your accountant.

You do have a business accountant, right?

sxcurry• 14 years ago

Important take-away - don't ever start compromising on your hourly or weekly rate. Patio is correct - it's very difficult to recover from that. Plus, in my experience, clients who want to bargain on your compensation are already devaluing what you do. I had a client who complained about my rate, and wanted to cut it substantially, because "there were lots of kids around who would work for less." I responded by telling him that he should hire one of those kids, and I would gladly hand his project over to them. I guess he reconsidered, because that was the last I ever heard about lowering my rate. I still work for that client, and have actually raised my rate by 50% over the last few years.

Don't undersell yourself!

Dramatize• 14 years ago

Has anyone had success with ecommerce consulting?

ana_hilinsky3• 14 years ago

Yes, do you have any specific questions? We do a lot of Magento builds for medium sized retailers.

atsaloli• 14 years ago

What does medium sized mean? My friend has an online store that grossed 5 million USD in the last year, he is looking for help him next-gen'ing his Magento store as well as SEO. Is that something you'd be good at? He wants one solution provider for both re-doing his store and SEO.

SonicSoul2• 14 years ago

Patrick, while being such a web marketing guru, how come you named your page title (and article path) "consulting" instead of using the title? I realized this after bookmarking you in pinboard and later realizing there is a mystery "Consulting" entry in my links feed.

joseph• 14 years ago

What are some good resources for learning how to handle corp to corp paperwork (contracts, billing, insurance, etc)? It's very easy to land contracts through agencies, who handle all of that stuff for you, but billing these kind of rates through them is not possible, since they are going to take a large cut for themselves.

jacques_chester5• 14 years ago

Form a working relationship with an accountant. This is exactly the sort of advice they are good at.

koevet2• 14 years ago

I have freelanced for almost 15 years in Europe and a bit of Middle East. I have done pretty well, charging easily 1K Euro a day, less in the last couple of years.

Last year, with a colleague and friend, we started our consulting company. The main reason for that being "let's scale!". We contacted a bunch of freelance colleagues we trusted and respected and asked them to join us as hired guns, whenever we needed more workforce.

Another reason for starting a company was that the developer profession is not rewarded as the experience increases. At least in Europe, a 3-4 years experience Java developer can make almost as much as a 10 years experience Java expert. And there are rate roofs which are hardly crossable, so even if you are really really good and have plenty of war stories, still the 1K/day roof is pretty hard to cross.

So far, it didn't go exactly as expected. We are doing ok, we have some clients (we are in the Java space, so mostly enterprise stuff) but nothing spectacular. We are having an hard time acquiring new clients and the long running European crisis doesn't help.

I'm working considerably more than in the past (weekends are a rare commodity, very long days, in short my work/life balance is critically crappy), so sometime I wonder if it's worth the hassle.

The scalability part is very tough: we hired one guy (who was a disappointment) and we use our trusted hired guns, who are often busy with their own consulting gig. Therefore, we are crazy busy.

Another problem is that the clients are really interested in our specific experience: that means they want to work with me or my partner, not with the company. This bit is hard to crack.

In short we are still figuring out how to go from here.

We will invest more in the web site and technical blog (we are also co-authoring a book) and we will hire one or two permanent devs (did I mention that hiring someone in Europe is bloody expensive, so that the 70% billable time mentioned in the article is too low?).

Working solo is easy, scaling is not. As a developer, you are faced with plenty of new challenges (finance, marketing, pr, negotiations, contracts, cashflow) - which is fascinating but damn consuming.

luke_s3• 14 years ago

"Another problem is that the clients are really interested in our specific experience: that means they want to work with me or my partner, not with the company. This bit is hard to crack."

You certainly have a lot more business experience than I do - however I've been working recently on preparing a lots of tender responses. I work at a software consulting firm, with about 10 devs and 20 GIS analysts.

In our tender responses we include the resumes of the people who will be working on the project as an appendix right at the back. At the front we have a section with our 'relevant experience'. In the 'relevant experience section' we NEVER mention which person worked on a specific project. Its always termed as "XYZ corp developed an app to ... " or "XYZ corp worked with ABC inc to ..."

I guess it comes down to a metal shift in always describing things your company has achieved, instead of things you as an individual have done.

jacques_chester5• 14 years ago

Lots of clients require you to say, in your contract, who will be working on a project. They will inquire after individuals.

koevet2• 14 years ago

We are to small to even think of compete in one of the bids for a large company or the government. The majority of our engagements result from some kind of personal contact my partner or myself have in in our previous life as freelance consultants.

Nevertheless, I see your point. It's just difficult to apply just yet.

We also considered removing the "team" page from our site altogether and just discuss generically about the technologies and clients we have been working with.

I did my homework and went through some marketing and web-marketing books. My catch is that for professional services companies - especially at the early stage, the "who are those guys" question is the first that springs to mind to a prospect and it would be suicidal to remove a reference to the admittedly impressive experience that we have accumulated along the years.

paulsutter• 14 years ago

A friend of mine is a marketing consultant and a real genius. He got paid $x0,000 to come up with the title and general theme for the book "Rich Dad, Poor Dad".

But the author has made $x0,000,000 from it, despite the mediocre (at best) quality of the book. Really it was the positioning that made it catch on. My friend's career is full of stories like that, so it's not a one off.

If you do work as a consultant, definitely, charge what you can. But no matter how much you charge for consulting, it's never as much as its worth.

Im sure that pg could charge what sounds like a really high rate for his time. But it would be nothing compared to what he can make from equity. And I promise, it would be a lot less fun.

mdonahoe• 14 years ago

That author is bankrupt now, for what its worth.

http://finance.yahoo.com/news/rich-dad-poor-dad-bankrupt-163...

alexfarran• 14 years ago

One of his many companies is bankrupt, as a ruse to avoid paying money he owes.

acconrad• 14 years ago

This is all well and good, but the biggest reservation I have about all of these consulting blog posts is who should do this and who shouldn't? I feel like consulting is easier to consider when you're a seasoned programmer (10+ years) because you have the accumulated knowledge to really provide value to a company when you're not an employee. I'm almost 27, is my lack of years of experience going to prohibit me from attaining consulting gigs? If I can optimize your front-end code, get you higher performance and SEO rankings, are you going to hesitate / ignore me because of my lack of years in the field?

borplk• 14 years ago

You mention a good point.

I think consulting requires a character. If you are 20-something I really doubt it's going to work very well.

Unless you have a history of extra-ordinary achievements which sets you apart, in which case you probably wouldn't have or want to do consulting.

trapexit3• 14 years ago

"If I can optimize your front-end code, get you higher performance and SEO rankings, are you going to hesitate / ignore me because of my lack of years in the field?"

This is a testable hypothesis. Test it.

Seriously. Most people who fail are defeated not by external forces, but by forces from within. Stop worrying and start testing.

robbyishere• 14 years ago

The choice of varying fonts makes me suspect he is trying to sell something? It looks like a get rich quick spam page, what do yall think?

flyinglizard3• 14 years ago

Here are my lessons after 6 years running a consulting firm in a pretty specialized business (high end ARM/embedded stuff), from the top of my head:

1. Avoid billing by hours, exactly for the reasons listed here. You can only lose like this; it carries more administration overhead, more friction with the customer and at the end there's a max budget allocated on the customer's end anyway - it's not like you can bill indefinitely if things don't go as planned.

2. Always charge fixed price for projects. Remember the budget allocation from #1? Use it. Bill twice as much in the beginning but avoid charging the customer even a penny more for delivering the work you're committed to, even if that means 'losing' money (you don't really lose when consulting, only earn less).

3. Work alone. Hiring people may seems like a good idea but then you've got a financial burden in the slower periods (and these always come when you least expect them). You can make good money alone, and you can make good (and great) money when you have 8+ people working for you but between 2 and 8 employees, you're busy full time getting enough work for the team and your margin on these employees simply isn't big enough (just think of the office costs). Besides, I don't like the whole pimping thing where you sell someone else's skills; YMMV.

4. You are a business problems solver. Don't tell a customer "no", just jack up the price if needed. If you intend to have a large project with them, don't charge them for general consultancy around the project. Happily give them your time for free; make your money on the project itself, not the meetings around it.

Edited to add something quite important, IMO: Whenever first meeting a customer, I try to get a high level picture of the business they are in, the product they are looking to develop, who will use it and so on - even if they are just looking for me to develop a specific component. It's very easy to fall into "XY Problems", and understanding the project environment would make it easier to assess the work and rates.

5. Remember there are people in a corporate environment on the other side. Make them look good in their company; give them whatever help needed and be their go-to guy. It's really important for the long term (and as fellow human beings). Don't ask for money for small modifications or changes, think of the administrative process they need for each line item - it makes them look incompetent or just annoys them with bureaucracy. You'll more than make up for that in the following work.

6. Long term, your entrepreneur skills are better spent at build your own business. Consulting is good for the free spirited folks that don't want a corporate environment, or for making a quick buck on some lucrative projects, but it's hardly a way to get rich and it's quite wearing in the long run.

Nevertheless, I think that professionally, consulting has been the greatest thing I could have done. The variety of projects, technologies and corporate environment (30+ customers here, most repeating) is great for your own development.

alinajaf• 14 years ago

Hi flyinglizard, I'd love to pick your brain about consulting on ARM/embedded stuff as it's a field I'm interested in. Do you have an email address that I can send a few specific questions to (that I promise won't take more than a few minutes to answer)? Thanks in advance.

flyinglizard3• 14 years ago

YHM

tibbon• 14 years ago

Also, I always keep in mind that at some positions; there are people who want to spend more money if they can. Spending more this year might mean a bigger budget next year. Sometimes power at the company is somewhat stacked by who manages a larger spend each year. And sometimes perception of quality has to do with what you spend. A $60k consultant must be better than a $6k consultant right?

flyinglizard3• 14 years ago

Charging more and being proud about it does add to your aura, in their eyes. They'll appreciate you more (given that you deliver).

About the budget allocation cooking - this behavior is usually observed - perhaps even common - at very large/government organizations. I'm more inclined to work with medium businesses and down to startups, so I've rarely encountered it myself.

jacques_chester5• 14 years ago

In fact I just a few weeks ago lined up a nice little contract on this exact basis. A customer had a budget allocation that they'd won but had been slow in lining up the work from another department in the same organisation. So now it's come to me, because they "need" to spend the money before the end of the year.

tiramisucode2• 14 years ago

I think one of the biggest reasons why people hesitate to get into consulting or freelancing work is because the hourly billing makes them nervous. Actually having to record every single hour and recording what they did seems pretty tedious. It's good to hear that weekly billing is considered to be viable because that makes things a lot easier.

ana_hilinsky3• 14 years ago

Thank you for writing this. It's too often that I feel alone in the world of dev consultancy! I've been running my company for 3 1/2 years, I started it straight out of college in 2008 when I realized job opportunities were slim to none and I'd have to figure out how to pay my rent regardless.

The most important lesson I learned all these years: find a reputable client, do good by them and watch word of mouth spread. Our biggest asset is the great referrals we get from our clients.

It's all too often that we end up taking over a project that was done by some previous consultant/freelancer where they obviously didn't care about the client relationship and let the work get sloppy. It's a shame! (Also, I'm not talking about tiny projects for no name brands, I'm talking about major retailers, musicians and sometimes fortune 500's).

mlemming• 14 years ago

After reading the article and the comments, I'm having a bit of a "a-ha!" moment with the billing question (by week, why didn't I think of that).

I have been an independent technology consultant for 12 years now, with a variety clients (big and small) and I'd say "successful" over all. I generally follow all of the good advice principals mentioned in these comments (mostly think long term with a client, don't charge for the small stuff, make the client feel important, etc).

The one item that keeps coming up over and over is that I'm "independent". It's just me. I get hit by a bus and my clients are out of luck. Now I agree that generally speaking they don't want anyone else working on their projects, but at the same time they would really like some backup. This seems like a nearly impossible problem. I'm not interested in hiring anyone for the reasons mentioned here. Plus, acting alone doesn't appear to give me the ability to get the really big projects ($1M+). Clients aren't going to give "just me" a project of this scale, it wouldn't be good business sense.

So, I've been stuck with letting "IT consultancy firms" find me work on several occasions. They get to mark up my rate, often mix me with other techies, and basically get to sit back and collect money for something that I'm delivering. I'm the one at the client, building the relationship, looking for more work, etc. It's always bothered me that because I'm not a "firm", I don't appear to bill higher rates or win bigger projects. Honestly, it's just me delivering the work anyway. Hopefully this makes sense.

The only way I've come up with to reverse this course is to create a firm where I partner with follow IT consultants and we own the firm. Ownership, I think, is the key. If I work for an existing IT firm, I make a nice hourly rate but I have nothing to show for it at the end. Meanwhile, the firm's ownership, who often are not techies and do not have technology skills, gain everything at the end of the day. If the technology staff owns the firm, then that builds in all sorts of interesting incentives. Now the owners actually have a reason to refer other technology people to the firm, builds firm value. Clients see the combined value of the firm, thus hopefully opening the doors to bigger projects and better value. Plus, the "backup" problem is solved since clients understand that there is a team.

I haven't quite figured out how to get this off the ground (really just started thinking about it over the last couple of months), but it's interesting to me that other independent IT consultants haven't done this already. Or, maybe they have and there's some obvious reason why it doesn't work.

tieTYT• 14 years ago

At the end of your article you said to hit reply if you want to hear more, but I didn't see a reply button so maybe you meant post it here?

I'd like an article about the transition from being an employee of a company to being a consultant. I've never been a consultant before and it's extremely intimidating to think about quitting my job. Did you/do others usually do this all at once, or is there a way to do it gradually? As gradual as possible, ideally.

Does it make sense to have a weekly rate if you only work 2 hours a day after your day job?

freework• 14 years ago

I imagine you must know a lot about programming to make this work? Ho often do you tun down jobs because the work is too over your head? Or you don't know the language the work is required to be written in?

davemel374• 14 years ago

Great Point about asking what they can cut to get to their budget... This is the reason why when negotiating media buys with commissioned salesmen, you should always give them a budget first and stick to it, and than negotiate for more exposure...This way, the salesmen's commission remains in tact, and he fights to get you what you want, because he wants the sale... Instead of being in a situation where every penny you try to cut in your media spend, he views as a cut to his commission. Great Post.

pknerd8• 14 years ago

Not sure but kind of relevant post in Inc:

http://www.inc.com/marla-tabaka/charge-customers-more.html

pknerd8• 14 years ago

A question comes across my mind; being a developer how one can make a difference between working as a freelance or given consultancy? At the end of the day you're going to write code, No?

Answers by you guys may help many freelancers who might prefer to follow Patrick.

d0n1• 14 years ago

I couldn't help but post, I run a very similar business model to the one that is described in the article and i can confirm that it is a very successful model. We are slowly at the stage of try to scale out.

The "terrifying cashflow" problems are very real, we take the model of taking a modest wage as to not cripple it the cash flow. We also have put on our first staff member which we are pretty excited about.

Its interesting to hear that others are using the residual cashflow to create a product. We have tried to generate a couple of differente products but it hasn't out performed the consulting arm.

tiramisucode2• 14 years ago

I'm just a beginning Ruby on Rails programmer right now, and I would love to start consulting on the side. Not just for the money, but just to gain business savvy. Negotiating and delivering goods is an essential skill I believe a business owner should have.

komlon• 14 years ago

You just go and be a contractor. There are tons of contracting positions open in London that will pay £500 - £600 per day. It's easy to make over £100k (pounds) if you're a good contractor.

http://www.cwjobs.co.uk/JobSearch/Results.aspx?Keywords=core...

flyinRyan3• 14 years ago

A contractor (contract based, usually 3-6 month intervals, low paid) is a totally different thing to a freelancer (higher bill rate, hourly ad hoc projects usually) and a consultant (much higher bill rate, but project based instead fixed interval based).

jeremysmyth• 14 years ago

To be a consultant, rather than an hourly-rate freelancer, you need two things:

- insight

- reputation

The reputation (from prior work) gets you in the door, and the insight (from your wealth of experience in the field, which you have, right?) is what gives you the right to call it a "practice", and the right to get you the 5- and 6-figure paychecks for each engagement.

Insight is more than just experience; you'll have to offer something unique and valuable for each customer that they can't just get from their local recruitment agency for commodity rates.

You have to be able to communicate at senior management level, in big picture terms, but also operate at the ground floor and all the way up. You must be able to advise at each level of the organisation, while understanding the nuts and bolts of the guy doing the programming (and quite probably doing it yourself).

dreamdu5t• 14 years ago

Everyone is talking about something different when they say "consulting."

I get the feeling some people are talking about freelance marketing with revenue-sharing, freelance development work, freelance sys admin work, and then business advice.

eldavido• 14 years ago

This post is great advice if you want to work doing consulting for large companies run by MBAs/business people that view technology as "IT": a tool for solving business problems. I'd guess 90% of programmers earn their living this way, so I agree with it, to a first approximation.

What Patrick doesn't acknowledge is the huge role of culture/norms in business, and how these differ based on geographic region, and the backgrounds of the founders.

Revenue and profit attribution are human processes that involve a lot of bias. If a salesperson sells twice as much product, should he earn twice as much compensation? How does marketing's work on improving the company's positioning/messaging, engineering's product work, and/or the overall state of the economy factor into this calculation? Who really "created business value" here?

The other problem is bigness: as companies get bigger, it's way harder to measure whose contribution is helping the company succeed, whereas it's a lot more obvious when only a handful of people are involved.

I'm an engineer, but I work at a product company. If the product is better, it sells more, and we get compensated more, along with sales, marketing, and the whole team. People in Chicago (where I grew up) still bring this dumb 19th century management model to their companies, and it's exactly why (1) all the best innovators and engineers head to the west coat, and (2) why I personally got the hell out of there. I wanted to be a professional programmer, someone who made peoples' lives better by shipping a superior product, and get compensated accordingly, not some IT lackey selling some nebulous concept of 'business value' to some feet-on-the-desk small-business-owning ex-investment banker who wouldn't know the difference between Objective-C and HTML.

How I went from $100-an-hour programming to $X0,000-a-week consulting

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